Bulkley v. Wis. Dep't of Taxation (In re Rohnert's Estate)

• Decision Date: 18 January 1944
• Citation: 12 N.W.2d 684,244 Wis. 404
• Parties: In re ROHNERT'S ESTATE. BULKLEY et al. v. WISCONSIN DEPARTMENT OF TAXATION et al.
• Court: Wisconsin Supreme Court

244 Wis. 404

12 N.W.2d 684

In re ROHNERT'S ESTATE.BULKLEY et al.

v.WISCONSIN DEPARTMENT OF TAXATION et al.

Supreme Court of Wisconsin.

Jan. 18, 1944.

Appeal from an order of the County Court of Milwaukee county; C. A. Hansen, Judge.

Proceeding in the matter of the estate of Emma U. Rohnert, deceased. From an order determining that an inheritance tax was due the state upon nonexercise by decedent of a power of appointment by will over the corpus of a trust consisting of intangible personal property located in Wisconsin, Eleonore R. Bulkley and others, nonresident beneficiaries of the trust, appeal.-[By Editorial Staff.]

Reversed and remanded, with directions.This appeal is from an order of the county court of Milwaukee county entered July 20, 1943, determining that an inheritance tax in the sum of $100,126.47 is due the state of Wisconsin upon the nonexercise by the decedent, Emma U. Rohnert, of a power of appointment by will over the corpus of a trust consisting of intangible personal property located in Wisconsin. The appellants are the daughters of Emma U. Rohnert, deceased, and are the sole beneficiaries of said trust as the result of the mother's nonexercise of such power of appointment. The facts, which are not in dispute, will be stated in the opinion.

Leekley & Williams, of Milwaukee, for appellants.

John E. Martin, Atty. Gen., H. H. Persons, Asst. Atty. Gen., Neil Conway, Inheritance Tax Counsel, of Madison, and John M. Niven, Public Adm'r, of Milwaukee, for respondents.

MARTIN, Justice.

Emma U. Rohnert died testate, a resident of Wayne county, Michigan, on November 24, 1939. By the terms of an inter vivos trust created April 30, 1908, by her father, Henry Uihlein, a lifelong resident of Wisconsin, she was given the income from the trust found for her life and a general testamentary power of appointment over the corpus at her death. The trust instrument provided that in the event of her failure to exercise the power of appointment the corpus would go to her heirs at law.

In her will, which was duly admitted to probate in Michigan, she expressly declined to exercise power of appointment. Accordingly the trust fund goes to her three surviving daughters, who were residents of Michigan at her death. The trust fund has at all times consisted of intangible personal property and at all times the evidences thereof have been physically kept and located in Milwaukee, Wisconsin. At the time of the death of Emma U. Rohnert the securities and bank deposits then comprising the trust had an estimated market value of approximately $1,000,000.

The single question on this appeal is: Does sub. (9) of sec. 72.01, Wis. Stats., exempt from Wisconsin inheritance taxes the transfer of intangible personal property contained in an inter vivos trust, subject to a power of appointment and having a situs in Wisconsin, to nonresidents, upon the death of the nonresident donee-owner of the power of appointment, where the said decedent resided in a state having a like reciprocal exemption statute? The court below answered this question in the negative.

Sec. 72.01(5), Wis.Stats., provides: ‘Transfer under power of appointment. Whenever any person or corporation shall exercise a power of appointment derived from any disposition of property, made either before or after the passage of sections 72.01 to 72.24, inclusive, such appointment, when made, shall be deemed a transfer taxable under the provisions of sections 72.01 to 72.24, inclusive, in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power, and had been bequeathed or devised by such donee by will; and whenever any person or corporation possessing such a power of appointment so derived shall omit or fail to exercise the same within the time provided therefor, in whole or in part, a transfer taxable under the provisions of sections 72.01 to 72.24, inclusive, shall be deemed to take place to the extent of such omission or failure, in the same manner as though the persons or corporations thereby becoming entitled to the possession or enjoyment of the property to which such power related had succeeded thereto by a will of the donee of the power failing to exercise such power, taking effect at the time of such omission or failure.’

Sec. 72.01(9), Wis.Stats. provides: ‘Reciprocity as to nonresident decedents. Personal property of a nonresident decedent made taxable under this chapter, except tangible personal property having an actual situs in this state, shall not be subject to the tax so imposed if a like exemption was allowed at the time of death of such decedent by the laws of the state, territory or district of the decedent's resident in favor of residents of this state.’

The inheritance tax law of Michigan as to taxing powers of appointment and providing for the reciprocal exemption of the intangibles of nonresident decedents is almost identical in language with the abovequoted sections of the Wisconsin inheritance tax law. See sub. (4) of sec. 3672, Compiled Laws of Michigan 1929.

The nonexercise of a power of a power of appointment is made taxable by sec. 72.01(5), Stats. Whether the power be exercised or not, the donee of such power is considered the owner of the property to which such appointment relates. Appellants concede the existence of a taxable situs of the trust property in question in Wisconsin; also, that Michigan, being the state of domicile of the donee, may tax the transfer of the property subject to the power of appointment. The probate court of Wayne county, Michigan, held that the transfer of the property subject to the power of appointment owned by the decedent, Emma U. Rohnert, was taxable by the state of Michigan under its inheritance tax statutes. Sub. (9) of sec. 72.01, Stats., was enacted by ch. 298, Laws 1929. The Michigan act relating to reciprocity in inheritance taxes was in effect at that time, so that both Wisconsin and Michigan had reciprocal exemptions for more than ten years prior to the death of Emma U. Rohnert. Both states are in a reciprocal relationship.

In Re Estate of Miller, 1942, 239 Wis. 551, 555, 2 N.W.2d 256, 258, 139 A.L.R. 1056, the court said:

‘Sec. 72.01(9), Stats.1939, provides for the exemption of transfers of property from nonresident decedents in case of reciprocal exemptions in other jurisdictions. Under this section transfers of personal property, except tangible personal property having an actual situs in this state, of a nonresident decedent, made taxable under our law, is not subject to such tax if, at the time of death of such decedent, a ‘like exemption’ was given ‘by the laws of the state, territory or district of the decedent's residence in favor of residents of this state.’ * * *

‘The purpose of the statute and its expressed scope appear in the words of the statute, and as it is drawn it does not include residents of foreign countries. This interpretation is sustained by a comparison of our statute with the terms of statutes in other states. Although the movement to-ward reciprocity has not been confined alone to the states of the Union...